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Investing in registered accounts such as RRSP (Registered Retirement Savings Plan), RESP (Registered Education Savings Plan), and TFSA (Tax-Free Savings Account) can be excellent ways to grow your wealth and achieve your financial goals. Let's take a closer look at each of these accounts:

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RRSP (Registered Retirement Savings Plan)

Purpose: RRSPs are designed to help Canadians save for retirement. Contributions made to an RRSP are tax-deductible, meaning they can reduce your taxable income for the year.

Contribution Limit: The contribution limit is based on a percentage of your earned income, up to a maximum annual limit set by the government.

Taxation: Contributions grow tax-deferred, meaning you don't pay taxes on the investment gains until you withdraw the funds during retirement. At that time, withdrawals are treated as taxable income.

Benefits: RRSPs provide an immediate tax benefit through deductions and can result in significant long-term tax savings if you withdraw the funds during retirement when your income is likely to be lower.

RESP (Registered Education Savings Plan)

Purpose: RESPs are intended to save for a child's post-secondary education. The primary beneficiary of the plan is usually the child.

Contribution Limit: There is no annual limit for RESP contributions, but there is a lifetime contribution limit of $50,000 per child.

Taxation: Contributions to a RESP are made with after-tax dollars, meaning they are not tax-deductible. However, the investment growth within the plan is tax-sheltered until withdrawals are made for educational purposes.

Benefits: The government provides incentives such as the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB), which can boost your savings. Additionally, when the funds are withdrawn for qualified educational expenses, the growth and government grants are taxed in the hands of the student, who typically has a lower income and may benefit from lower tax rates.

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TFSA (Tax-Free Savings Account)

Purpose: TFSAs are versatile accounts that can be used for various financial goals, such as saving for a home, a vacation, or a rainy-day fund. They provide tax-free growth on investments.

Contribution Limit: The contribution limit is set by the government and accumulates each year. The cumulative limit since the introduction of TFSAs in 2009 was $75,500 as of 2021, but it may increase in subsequent years.

Taxation: Contributions to a TFSA are made with after-tax dollars and are not tax-deductible. However, any investment growth, including interest, dividends, and capital gains, is not subject to taxation, even when withdrawn.

Benefits: TFSAs offer flexibility in accessing funds at any time without tax consequences. They can be a powerful tool for both short-term and long-term savings, providing tax-free growth and withdrawals.

When deciding where to allocate your investments, it's important to consider factors like your financial goals, time horizon, risk tolerance, and personal circumstances. Our financial advisor can provide personalized guidance based on your specific situation.